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Sponsored by Gem Key Bitcoin

Sponsored by Gem About CoinDesk
• World leader in digital currency news, prices and information • The Bitcoin Price Index serves as an industry reference point • International team headquartered in London • Editors based in London, New York, San Francisco and Tokyo 2State of Bitcoin Q1 2015

Sponsored by Gem Q1 2015
Summary 7State of Bitcoin Q1 2015 Sustained pressure on bitcoin’s price, which is due to the current demand- supply imbalances, is winnowing the mining and exchange sectors Q1 was bitcoin’s largest VC investment quarter yet with $226m raised; all-time bitcoin VC investment now totals $676m 21 Inc, which announced $116m in new funding, surpassed Coinbase as the best-capitalized bitcoin startup Improved regulatory clarity (ie NY BitLicense revisions, UK’s favorable posture) are building industry confidence and attracting Wall Street Blockchain’s total wallets passed three million; merchant adoption slowed due to bitcoin’s underwhelming value proposition for mainstream consumers Bitcoin’s price briefly dropped to $177 in January 2015, and is down 24% so far in 2015

Sponsored by Gem Two Biggest
Bitcoin VC Deals in Q1… 25State of Bitcoin Q1 2015 $116m $75m (Series C) January 2015(Series A) March 2015* Source: CoinDesk *Note: The precise timing of when the $116m was raised, or whether it was raised in various individual stages, has not been revealed.

Sponsored by Gem Bitcoin’s Lack
of Use in Commerce is Not Just a ‘Chicken and Egg’ Problem 50State of Bitcoin Q1 2015 Sources: Pantera Capital, ZepChain, CoinDesk (http://www.coindesk.com/is-bitcoins-merchant-appeal-fading/) "I believe merchants have been widely disappointed by the number of transactions they see in bitcoin. Most merchants have taken a passive approach to integrating bitcoin as a payment method, instead of strategically testing and optimizing checkout flows to encourage consumer adoption."Steve Beauregard, CEO of GoCoin • Merchants generally welcome bitcoin adoption • Lack of consumer adoption is the fundamental problem • Consumers need compelling reasons to use the volatile and still relatively hard to acquire bitcoin over alternatives

Sponsored by Gem CoinCenter’s Public
Sentiment Survey Indicates Low Bitcoin Awareness in US 51State of Bitcoin Q1 2015 Source: CoinCenter 64.3% of the general American population are not familiar at all with bitcoin 6.2% of the general American population say they have used bitcoin Distrust in bitcoin decreases from 50% to 37% as familiarity with bitcoin increases People who are familiar with bitcoin are more likely to think it is useful But the distrust in bitcoin is similar (47%) among those who frequently use bitcoin and those who never use 53.1% of those who are very familiar with bitcoin have never used it

Sponsored by Gem The Five
Types of Bitcoin User 54State of Bitcoin Q1 2015 1. People who want a cheap, fast, global online payment experience 2. People who want access to a new suite of consumer payment applications 3. People who want to connect to the global economy for the first time 4. People who believe bitcoin is an attractive investment 5. People who value financial privacy Sources: CoinDesk, Coinbase Blog

Sponsored by Gem Bitcoin Transactions
Have Been Rising; Average of 10,000 Daily Transactions by Popular Addresses* 55State of Bitcoin Q1 2015 40,000 60,000 80,000 100,000 120,000 Apr-14 Jul-14 Oct-14 Jan-15 Total no. of daily transactions No. of daily transactions excluding popular addresses Source and note: Blockchain.info, *100 most popular addresses. • The milestone of 100,000 daily transactions by ‘addresses excluding popular ones’ was reached in February, which is two months later than total transactions Number of Transactions per Day

Sponsored by Gem Property Title:
Blockchain Technology Could Empower the Poor, Reduce Global Inequality 62State of Bitcoin Q1 2015 • With protected property title, people could better engage in economic activities such as investment and infrastructure construction. Sources: Hernando de Soto (2002) Law and Property Outside the West, Housing Finance International June 1994, de Soto, Hernando. 2000. The Mystery of Capital. UK: Black Swan. “An elite minority enjoys the economic benefits of the law and globalization, while the majority of entrepreneurs are stuck in poverty, where their assets – adding up to more than $10tn worldwide – languish as dead capital in the shadows of the law.” - Hernando de Soto, economist Lima, Peru “Blockchain technology could 'parachute' property title services into many poverty stricken countries.” - Balaji S. Srinivasan, 21 Inc

Sponsored by Gem Financial Automation:
Smart Contracts are Being Deployed by a Number of Companies 63State of Bitcoin Q1 2015 Sample smart contract: A dog with a GPS chip in his collar is walked by a dog walker. On completing the walk the collar sends a network signal, and the contract automatically executes a cryptocurrency payment to the walker. Sources: CoinDesk, Ripple Labs, BitHalo, Reality Keys, Fast Co.labs, Morton Fraser

Sponsored by Gem Voting: Blockchain-Based
Tech is Already Being Used in Elections 64State of Bitcoin Q1 2015 • In a traditional voting system, you have no idea about whether your vote is counted. However, blockchain voting allows you to have the ability to audit whether your vote is counted by viewing your vote using a public ledger. • At the same time, anonymity is also protected. Source: CoinDesk

Sponsored by Gem Notary: Blockchain
Technology Could Reshape Notarization Services and Reduce Inefficiency 65State of Bitcoin Q1 2015 Sources: The Economist, Proof of Existence, CoinDesk • A study carried out for the European Commission in 2007 found that house buyers in countries with highly regulated notarial systems paid much higher legal fees than house buyers elsewhere (see chart). • Blockchains can store and certify the existence of documents without relying on a central authority. Companies like CoinSpark and Proof of Existence are providing the service.

Sponsored by Gem Views on
the Application of Bitcoin Technology to the Internet of Things 66State of Bitcoin Q1 2015 Sources: CoinDesk, LinkedIn “Applying the blockchain concept to the world of the Internet of Things offers fascinating possibilities. Right from the time a product completes final assembly, it can be registered by the manufacturer into a universal blockchain representing its beginning of life. Once sold, a dealer or end customer can register it to a regional blockchain (a community, city or state).” “We demonstrate how a humble washer can become a semi-autonomous device capable of managing its own consumables supply, performing self-service and maintenance, and even negotiating with other peer devices both in the home and outside to optimize its environment.” Paul Brody, Technology Strategy Consulting, IBM

Sponsored by Gem Functional Bitcoin
Applications Can Be Grouped into 10 Categories 67State of Bitcoin Q1 2015 Source: CoinBase Blog Email – Email applications that eliminate spam by requiring BTC for email delivery Video – Video applications that require one-click micropayments to view video content News – News sites that eliminate advertising for users by requiring BTC for time spent viewing content Crowdfunding – Global crowdfunding applications that allow project creators to raise funds from around the world Payouts – Applications that allow creators or service providers anywhere in the world to get paid by a global audience

Sponsored by Gem Bitcoin Functional
Applications (contd.) 68State of Bitcoin Q1 2015 Source: CoinBase Blog Remittances – Global remittance applications that enable worldwide cross-border payments Ecommerce – Bitcoin-focused merchant directories that offer a beautiful UI for consumers Communication Networks – Applications that incentivize nodes to provide resources to communications networks by rewarding BTC for participation Identity – Distributed identity applications that give people control of their own identity, built on top of a distributed identity protocol Attribution – Attribution applications that allow users to prove ownership of data, built on top of an attribution protocol

Sponsored by Gem Software Developer
Interest in Bitcoin Continues Steady Growth 71State of Bitcoin Q1 2015 Number of Created Repositories in Github with Bitcoin in the Name or Description Data source: BitcoinPulse

Sponsored by Gem Quiet, Successful
Update to the Bitcoin Core Protocol in Q1 73State of Bitcoin Q1 2015 Consensus library: • The consensus library makes it easier to build competing full node implementations by reusing the most sensitive and difficult part of the Core source code Transaction fees: • Core wallet users are provided with an estimate of the fees to pay in order to get quicker confirmations Headers-first syncing: • A node first downloads parts of a block before proceeding to download the entire blockchain, which speeds up communications between nodes. This makes running a full node a more attractive prospect even as there are fears over a declining number of nodes in operation Source: CoinDesk New features added to Bitcoin Core software version 0.10 include:

Sponsored by Gem Bitcoin Startups
Targeting the World’s 2.5 Billion ‘Unbanked’ 75State of Bitcoin Q1 2015 Sources: CoinDesk, Mckinsey, Bitcoin for the Unbanked Percentage of total adult population that does not use formal or semiformal financial services 0-25% 26-50% 51-75% 76-100% Estimates used to calculate regional averages

Sponsored by Gem Wall Street
Interest in Bitcoin is Growing 76State of Bitcoin Q1 2015 Three blockchain startups selected for Barclays Accelerator, with one aiming to provide blockchain solutions for the insurance industry Sources: CoinDesk, Bank Innovation Citi wants “to [accelerate] emerging technologies that have the potential to transform financial services experiences for Citi’s customers” UBS is set to open a London-based research lab to explore the application of blockchain technology in the financial services industry

Sponsored by Gem Nine Banks
in Total Have Established Banking Relationships with Bitcoin Startups to Date 78State of Bitcoin Q1 2015 Source: CoinDesk • Securing banking partnerships has hindered the operations of bitcoin companies, often forcing them to halt part of their offerings • However, partnership between banks and bitcoin companies could improve security and efficiency 24th Mar 2015 27th Mar 2015 Newly Announced Banking Relationships

Sponsored by Gem Views on
How Bitcoin Technology Can Transform Financial Services 79State of Bitcoin Q1 2015 Sources: CoinDesk, LinkedIn “Digital Assets has a revolutionary technology platform that eliminates the counterparty risk and lack of transparency that has hindered mainstream adoption of cryptographic technology.” “The possibilities for reducing cost and risk in settlement are enormous.” Blythe Masters, CEO of Digital Assets Holdings LLC

Sponsored by Gem Select Country
Regulatory Updates 80State of Bitcoin Q1 2015 Source: CoinDesk The government does not see a need to regulate or ban bitcoin activities. Bitcoin does not pose a substantial threat to Hong Kong's financial system. Spanish political party, Unión Progreso y Democracia (UPyD), has submitted a proposal to the country's Congress outlining why bitcoin regulation is needed. Digital currency businesses will have to comply with the Isle of Man's anti-money laundering (AML) laws from 1st April. Hong Kong Isle of Man Spain

Sponsored by Gem In Q1
There Were Positive Developments With the NY BitLicense Proposal, but … 81State of Bitcoin Q1 2015 • Businesses that “store”, “hold”, “issue”, “administer”, “exchange” or “control” digital currency on behalf of their customers require a license to operate • An exemption added for companies engaging in mere software “development and dissemination” • Eliminates the prohibition on digital currency investments, so long as they are held in an acceptable ratio • Demands that the licensee must submit non- customer identities “to the extent practicable” • NY regulators accepted new comments, further revisions are a possibility Sources: CoinDesk. Manhattan photo courtesy of Symmetry50

Sponsored by Gem … Problems
Remain with BitLicense’s ‘Duplicative and Redundant’ Requirements 82State of Bitcoin Q1 2015 1. Anti-money laundering (AML) requirements: Virtual currency exchangers and administrators are already required to comply with federal AML regulations 2. State money transmission regulations are already in place and are applicable to all virtual currency businesses “We should be mindful of this 'tax on innovation' that regulations place on the startup sector and high growth companies in general.” Fred Wilson, Union Square Ventures Source: CoinDesk (http://www.coindesk.com/fred-wilson-on-the-proposed-bitlicense-regulations/)

Sponsored by Gem Views on
Bitcoin Regulation and its Potential Positive Impact on Economic Growth 84State of Bitcoin Q1 2015 George Osborne Chancellor of the Exchequer, Second Lord of the Treasury Source: CoinDesk “Among other things, [the programme] will look at whether regulation of the sector is required, so that virtual currency businesses can continue to be set up in the UK, and people and businesses can use [cryptocurrencies] safely.” “It's only by harnessing innovations in finance, alongside our existing world class knowledge and skills in financial services, that we'll ensure Britain's financial sector continues to meet the diverse needs of businesses and consumers, here and around the globe, and create the jobs and growth we all want to see in the future.”

Sponsored by Gem About CoinDesk
• Find out more at www.coindesk.com • Follow us on Twitter: @CoinDesk • Subscribe to our email newsletters for the latest daily cryptocurrency news, or updates on our research • If you have data you think should be included in future State of Bitcoin reports, email stateofbitcoin@coindesk.com • We also welcome any feedback you have on the report • The State of Bitcoin reports and CoinDesk’s in-depth research reports are available here 86State of Bitcoin Q1 2015

Sponsored by Gem Disclaimer •
CoinDesk makes every effort to ensure that the information in this presentation is accurate and up to date. We cannot, however, accept responsibility for any loss or inconvenience caused by reliance on the material contained here. • This presentation does not constitute financial advice or an investment recommendation in any way whatsoever. It is recommended that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions. 87State of Bitcoin Q1 2015